Mumbai, Nov 26 (NationPress) India seems to be on the brink of a long-anticipated earnings upgrade cycle, fueled by robust corporate performances, heightened festive demand, favorable policy initiatives, and an enhancing macroeconomic landscape, according to a report released on Wednesday.

After experiencing five successive quarters of downgrades, Nifty earnings have turned a corner, with upgrades of 0.7%, 0.9%, and 1.3% for FY26, FY27, and FY28, respectively.

According to the report by PL Capital, this signifies a remarkable change in sentiment and provides early yet distinct indicators of a widespread recovery in corporate profitability.

In the past three months, Nifty has climbed 4%, breaking free from an extended consolidation phase.

The report highlights that this transition to stronger-than-anticipated second-quarter (Q2 FY26) corporate earnings, optimism regarding the resolution of tariff disputes with the United States, and a noticeable rebound in domestic consumption during the ongoing festive and wedding seasons are contributing factors.

This resurgence is bolstered by the GST rate adjustments made in September 2025, which have lowered effective retail prices across various consumer categories, thereby enhancing spending in both urban and rural sectors.

Utilizing a 15-year average price-to-earnings (PE) ratio of 19.2 and a September 2027 estimated earnings per share (EPS) of 1,515, the report projects a 12-month Nifty target of 29,094, with an optimistic valuation of 30,548 and a pessimistic scenario of 26,184.

The model portfolio remains overweight on sectors such as banks, healthcare, consumer goods, automobiles, and defense, while adopting underweight positions in IT services, commodities, and oil and gas, as per the report.

Corporate earnings for this quarter have shown resilience, with companies in the coverage universe recording 8.1% growth in sales, 16.3% in EBITDA, and 16.4% in profit after tax (PAT).

Notably, EBITDA and PAT exceeded estimates by 5% and 7.1% respectively, marking the first upgrades in NIFTY EPS since August 2024, the report emphasized.

Sectoral performance was particularly strong in hospitals, capital goods, cement, electronics manufacturing services (EMS), ports, non-banking financial companies (NBFCs), and telecommunications.

Commodity-linked sectors, especially cement, metals, and oil and gas, experienced substantial profit growth ranging from 33% to 58%.

While government capital expenditure has served as a crucial driver of economic momentum over the past four years, with growth exceeding threefold since the pandemic, the report cautions that the second half of FY26 may witness some moderation.

In the first half of the current financial year (H1FY26), capital spending has already achieved 52% of the annual target, compared to 41% the previous year.

However, the combination of GST rate rationalization, increased fertilizer subsidies, and modest direct tax collections could cap the government’s ability to exceed its current capital expenditure budget.